When is a seller entitled to keep the earnest money deposit if buyer backs out of the deal

Probably not. The CAR form makes it very difficult for a seller to receive (through escrow) or keep (if held by the listing broker/seller's agent) a buyer's deposit unless and until the buyer has actively removed all contingencies and thereafter failed to timely close escrow. See paragraph 14 of the contract which provides for the continuation of the buyer's contingencies, even after the stated time limits, and requires the seller to give the buyer a 24 hour "Notice to Buyer to Perform" as a precondition of cancelling the escrow. If the buyer doesn't timely remove the contingencies after receipt of the notice, then the seller may "cancel this Agreement in writing and authorize return of Buyer's deposit..." In my experience, many real estate practitioners are unaware of this provision.

The reason for the qualified "probably not" is two fold. First, an answer must always be qualified where limited background facts are known. Here, it is not clear who is holding the deposit, whether the liquidated damages clause was initialed, and whether the seller had any actual damages as a result of the cancellation. Second, if the buyer's reasons for cancelation have nothing to do with any of the contingencies, the seller may claim that the buyer has breached the implied covenant of good faith and fair dealing and assert entitlement to the deposit for that breach. As a practical matter, it is very difficult for a seller to prove that the buyer cancelled in bad faith and not for some legitimate reason.